Boosting Financial Crime Prevention Measures in Luxembourg
The Grand-Duchy of Luxembourg has established a robust anti-money laundering and counter-terrorist financing framework, but further efforts are necessary to effectively combat money laundering and terrorist financing threats.
Vulnerabilities in Luxembourg’s Financial Hub
As a significant international financial hub, Luxembourg is vulnerable to foreign predicate offences such as tax crimes, corruption, and fraud. The country’s banking, investment, and trust and company service sectors are particularly at risk due to high-risk products and services offered to international clientele.
Off-Site Supervision and Monitoring
The Commission de Surveillance du Secteur Financier (CSSF) has prioritized off-site supervision and monitoring of the banking and investment sectors. However, more work is needed to implement a similar approach for non-financial sectors such as real estate, notaries, and trust and company services.
Strengths in Domestic Cooperation and Coordination
Luxembourg’s system excels in domestic cooperation and coordination, with authorities having timely access to beneficial ownership information and cooperating extensively with international counterparts. The Financial Intelligence Unit (CRF-FIU) produces high-quality financial intelligence products, but its resources may be stretched as it takes on a more complex role.
Areas for Improvement
To strengthen its anti-money laundering and counter-terrorist financing efforts, Luxembourg should:
- Focus on sectors at risk of money laundering, such as real estate and professionals offering trust and company services
- Improve the detection, investigation, and prosecution of complex cases
- Develop a plan to combat terrorist financing, including improving oversight of non-profit organizations and addressing gaps in its targeted financial sanctions regime
Asset Recovery Efforts
Despite some progress, Luxembourg still lags behind in asset recovery efforts. However, the country has made effective use of tools to freeze, seize or confiscate assets in response to foreign requests.
Proactive Approach to Combating Terrorist Financing
Luxembourg’s proactive approach to identifying and investigating terrorist financing activity is commendable, although no prosecutions or convictions have yet resulted from these efforts.
Conclusion
While Luxembourg has a solid foundation for combating financial crime, more needs to be done to ensure its international financial hub status is protected. By focusing on sectors at risk of money laundering, improving the detection and prosecution of complex cases, and developing a plan to combat terrorist financing, Luxembourg can strengthen its anti-money laundering and counter-terrorist financing framework.